Generally, the benefits of an appellate review system in law can
never be overestimated. Whether in formal legal settings or in the most remote
forms of family or customary methods of dispute resolution, the importance of
appeals remains high in ensuring the enthronement of fairness and equity in the
adjudicatory system as well as upholding the integrity and confidence in such
system. Granted, the feature of finality in arbitration seems laudable and a
good reason to opt for it because of the certainty involved. This is
particularly so, as unlike the normal dispute resolution system where the
parties have no say in choosing their umpire, in arbitration and other ADR
systems the umpire is selected based on a guided consensual process by the
parties.
Also, for some, endless and protracted appeals if introduced
into arbitration, may steal the gloss of the nature of arbitration as a smooth
and less cumbersome method of dispute resolution. However, the assurance that
in the event of a grave and manifest error or injustice, an appeal or review is
available (at least a one- tier appeal) creates some satisfaction and
confidence in the mind of parties.1
This article attempts to critically discuss the issue of absence
of a formally established review arbitration body or institute to which
unsatisfied parties can appeal. The writer in a bid to advocate for the
creation of an appellate body in international arbitration gives consideration
to the dearth of a centralized body to review arbitral awards either for error
correction, law making or for the purpose of setting legal precedents.
International
Arbitration and Right of Appeal
Court judgments in commercial cases can usually be appealed at
least once, often more than once, to higher courts; this is however not true
for arbitration, as one of the most striking features of international
arbitration is the absence of a review body2. There is generally no appeal at all permitted from an arbitral
tribunal's award in an international arbitration. The result is absolutely
final, subject only to a request to set aside the award due to procedural
irregularities such as an unfair procedure or arbitrator lack of independence.3
Thus, in most cases, parties are left to 'lick their wounds' in
the event that they or the arbitrators fail to get it right. Consequently,
academics, stakeholders and practitioners alike in recent years have vigorously
advocated for the establishment of a unified body saddled with the task or
responsibility of revisiting, reviewing and the impeachment of arbitral awards
in line with the dictates and demands of necessity. Today, the dogma of
finality in international arbitration has come under attack, as practitioners
and academics have advocated for the introduction of appeals mechanism.4
A dispassionate observer taking a keen observation of the
arbitration landscape in international commerce would easily take notice of one
obvious fact- the inexhaustible list of international arbitration institutions
with expertise in alternative dispute resolution. For instance as at today, a
host of such institutions exist in different parts of the world. Some of these
institutions include the American Arbitration Association (AAA), Lagos Court of
Arbitration (LCA), Arbitration Institute of the Stockholm Chamber of Commerce
(SCC), Dubai International Arbitration Centre (DIAC), International Centre for
Dispute Resolution (ICDR), International Centre for Settlement of Investment
Disputes (ICSID), International Chamber of Commerce (ICC), London Court of
International Arbitration (LCIA), Permanent Court of Arbitration (PCA),
Singapore International Arbitration Centre (SIAC), Swiss Chambers Arbitration
Institution, United Nations Commission on International Trade Law (UNCITRAL),
to mention a few. However, it is to be observed that these bodies are to a
large extent, "apex" tribunals when it comes to arbitration as awards
made or rendered by them are final decisions from which no appeal may lie. In
the words of Eli Lauterpacht,
"A domestic lawyer [...] might be forgiven for thinking it
strange that the international community, apparently so well- equipped with
means of judicial settlement, appears to lack what seems to be a natural or
inherent feature of national judicial systems, namely a comprehensive system of
appeal".5
From Lauterpacht's comment above, one may then require to know
what makes an appellate system so important generally and indeed specifically
for an arbitration system.
Why Have an
Appellate System in Arbitration
Appellate review fulfills two principal functions- error
correction and lawmaking6. While these functions are
intertwined in operation; the purposes they serve are distinct. Error
correction protects litigants against erroneous decisions and safeguards the
integrity of dispute resolution. Law making clearly refers to the function of
appellate courts in the development and harmonization of standard practices or
norms, what is termed in common law as the doctrine of stare decisis. The basis
on which these arguments are made are that international commercial
transactions and investments are as well as ensuing arbitration are of high
stakes. Hence, it is considered imperative that recourse be had to another
arbitrator when awards seem to, or manifestly contain errors. More so,
considering the risk involved in such finality of awards, proponents have
argued that there could not possibly be a reason why an aggrieved party should
be totally barred, foreclosed from or denied the option of an appeal,
especially where the circumstances clearly requires one. A host of
possibilities exist that could turn the justice of an award on its head.
According to James M. Gaitis:
"The arbitral tribunal might wrongly determine that the
applicable law does not permit an award of prejudgment interest in a particular
arbitration, or the tribunal might apply an incorrect statute of limitations.
The tribunal might inadvertently fail to recognize that the parties' contract
mandates and the law permits, an award of attorneys' fees to the prevailing
party, or might misinterpret the law relating to fiduciary duties. The tribunal
might misapprehend the doctrine of respondeat superior, or incorrectly describe
the force and effect of administrative regulations-for example, oil and gas
regulations regarding the correlative rights of interest owners. Allusions to
the law of other jurisdictions, and the ensuing reliance on the law of those
jurisdictions, might be based on a misunderstanding of that law. The tribunal
might incorrectly conclude dicta in a decision actually constitute a formal
holding. Simple statutes and complex bilateral investment treaties might be
misread, and the language of cases and statutes alike might be misquoted and misapplied".7
These arguments are highly convincing considering the value of
most international arbitrations and arbitral awards which in many cases run
into billions of dollars. Such awards, where given erroneously, if not reviewed
or set aside could be the basis for grand scale injustice, manifest unfairness,
hardship on the losing party as well as a parody of the entire objective of the
practice of arbitration and non-adjudicatory settlement of disputes. In the
end, the long run effect on how arbitration would be viewed can never be
positive. Consequently, litigation, regardless of its relative
"difficulty" might turn out a better option after all.
To What
Extent Has the Clamour for Reform Been Incorporated in Modernizing the
International Arbitration System?
Currently, some arbitral institutions like the ICSID provide for
what could be termed a "review" process in their arbitral rules.8 Under the ICSID Rules, either party may request annulment of
the award by an application in writing addressed to the Secretary-General on
one or more of the grounds that:
The Tribunal was not properly constituted;
The Tribunal has manifestly exceeded its powers;
There was corruption on the part of a member of the
Tribunal;
There has been a serious departure from a fundamental rule
of procedure;
Or that the award has failed to state the reasons on which
it is based.
The application shall be made within 120 days after the date on
which the award was rendered except that when annulment is requested on the
ground of corruption such application shall be made within 120 days after
discovery of the corruption and in any event within three years after the date
on which the award was rendered.9 On receipt
of the request the Chairman shall forthwith appoint from the Panel of
Arbitrators an ad hoc Committee of three persons. None of the members of the
Committee shall have been a member of the Tribunal which rendered the award,
shall be of the same nationality as any such member, shall be a national of the
State party to the dispute or of the State whose national is a party to the
dispute, shall have been designated to the Panel of Arbitrators by either of
those States, or shall have acted as a conciliator in the same dispute. The
Committee shall have the authority to annul the award or any part thereof on
any of the grounds set forth in paragraph (1)10.
Also, under the United Nations Commission on International Trade
Law ("UNCITRAL or UML"), a successful challenge of an arbitral award
will usually result in the award being 'set aside,' 'vacated,' or' annulled,'
and therefore ceasing to exist, at least within the jurisdiction of the court
setting it aside.11
In spite of the above, it suffices to state that this procedure
falls short of a full fledge appeal which ought to lie to an independent and
totally separate body from the ICSID as it were. Using the analogy of courts of
coordinate jurisdiction not being allowed to sit on appeal against the decision
of the other court of coordinate jurisdiction, as well as the nemo judex rule
of natural justice, the writer is of the view that to the extent that the
review is from an ICSID panel rather than an independent and higher body with
only appellate jurisdiction, it is arguable that the review panel is merely
another version of the same arbitral tribunal whose award is being appealed
against. More so, convincing the aggrieved party or 'appellant' of the
objectivity of the review panel might prove to be impossible or at best an
uphill task.
Of note is the recently concluded CIArb's Centenary Conference
held in Singapore on the 4 September 2015, where the new CIArb Arbitration
Rules 2015 was launched.12 The Rules take effect from 1
December 2015 and supersede the current CIArb Arbitration Rules 2000 considered
by many to be otiose and long overdue for amendment given their limited
application to domestic arbitrations in some jurisdictions especially under the
English Arbitration Act 1996.
The new Rules are perceived to be more suitable for
international application and are largely tailored in line with the
internationally recognised and widely used UNCITRAL Arbitration Rules 2010.
This is a welcome development as it appears to be a direct response to the
longstanding yearnings of stakeholders in arbitration.
Recommendations and Conclusion
This work has briefly attempted to advocate or at least lend
some support to the clamour for the creation of an independent arbitral review
or appellate body for international awards.
It is thus recommended that a separate appellate body be
established to review arbitral awards- a body totally extricated from and
independent of any currently existing institutions. There is an inherent
frailty in the concept of finality in international arbitration. The lack of
formal appeal does not bring finality13. Hensce, to better sustain the confidence in arbitration and
enable parties enjoy the benefits of appeal generally, it is recommended that a
formal or unified appellate body be established to review awards arising from
international arbitration. Like the International Court of Justice (ICJ), the
Court of Arbitration for Sports (CAS) an appellate body with such centralized
powers and function to review arbitral awards from different institutions would
certainly do more good to the world of international arbitration. In what
appears to be concurrence with the above, in 2002, the United States
legislative branch of the ICSID instructed its treaty negotiators through the
"Trade Dispute Act" to improve mechanisms used to resolve disputes
between an investor and government through ... [the] the establishment of a
single appellate body to review decisions in investor-to- government disputes
and thereby provide coherence to the interpretations of investment provisions
in trade agreements"14
Furthermore, going by the huge monetary cost involved in
international commercial transactions and the resulting arbitral proceedings,
it may be unjust to foreclose, shut out an aggrieved party, or deprive him the
opportunity to seek redress or to apply for the award to be overturned and corrected.
In most civilized constitutions of the world, the right to appeal is enshrined15; indicative of the fact that the right of appeal is indeed
sacrosanct. If the right to be heard fairly or the right to fair hearing and
access to justice are taken seriously, it would only be wise and smack of
commonsense to create a right to redress or review, if the initial hearing is
flawed with manifest injustice and errors.
Footnotes
1. For
example, in traditional African societies, recourse is often made to the eldest
or alpha male in the family where a family member feels dissatisfied with the
outcome of a settlement conducted either by younger members or by the
matriarchal head of the home.
2. Irene M.
Ten Cate, "International in Arbitration and the Ends of Appellate
Review". INTERNATIONAL LAW AND POLITICS [Vol. 44:1109
3. http://www.iccwbo.org/products-and-services/arbitration-and-adr/arbitration/;
assessed on 02/16/2015 at 13.12pm; http://www.mcmillan.ca/international-commercial-arbitration-awards--no-deference-on-questions-of-jurisdiction.
4. http://www.iccwbo.org/products-and-services/arbitration-and-adr/arbitration/;
assessed on 02/16/2015 at 13.12pm; http://www.mcmillan.ca/international-commercial-arbitration-awards--no-deference-on-questions-of-jurisdiction.
There is generally no appeal from an international commercial arbitral award.
However, under UNCITRAL's Model Law on International Commercial Arbitration
(the "Model Law") (which is incorporated by reference in the
international commercial arbitration legislation of each province), parties may
bring an application to set aside an award on certain grounds. One of the more
frequently invoked grounds is that the arbitral tribunal made a decision about
something that is outside of its jurisdiction (Article 34(2) (a) (iii) of the
Model Law).
5.
Lauterpacht, Aspects of Administration of International Justice, 99.
6. David
Frisch, Contractual Choice of Law and the Prudential Foundations of
Appellate Review, 56 VAND. L. REV. 57, 74 (2003) ("[T]he distinction
between error correction and law development . . . has been the keystone upon
which our whole system of appellate courts has been built."); Chad M. Old
father, Error Correction, 85 IND. L.J. 49, 49 (2010) ("Most
depictions of appellate courts suggest that they serve two core functions: the
creation and refinement of law and the correction of error."); Irene M.
Ten Cate, "International in Arbitration and the Ends of Appellate
Review". INTERNATIONAL LAW AND POLITICS [Vol. 44:1109
7. C Okeke,
Judicial Review of Foreign Arbitral Awards: Bane, Boonor Boondoggle; 10 Y.
INT'L L. REV29(1997)
8. Under
Article 52 of the ICSID Rules
9. Article
52(2) ICSID Rules
10. Article
52(3) ICSID Rules
11.F
Leila. 2010. "Setting Aside an Arbitration Award" The Selected
Works of Fernando Leila; Available at: http://works.bepress.com/fernando_leila/2
assessed on 02/17/2015.
12. https://www.ciarb.org/news-views-events/ciarb-news/news-detail/news/2015/09/08/new-ciarb-arbitration-rules-launched-in-singapore
( accessed on October 5, 2015)
13. William
H. Knull, III & Noah D. Rubins, Betting The Farm on International
Arbitration: Is It Time To Offer An Appeal Option? 11Am. RevInt'l Arb.531
(2000).
14. Tams J,
An Appealing Option? The Debate about an ICSID Appellate Structure, Essays in
Transnational Economic Law. No. 57/ June 2006 5
15. See
section 241 of the 1999 Constitution of the Federal Republic of Nigeria (As
amended). See also Article 1, section 8 of the Constitution of the United
States of America.
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